The big mistake students, families make with financial aid

By Personal FinanceFOXBusiness

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As the cost of higher education continues to rise and student debt loads pile up, there is one mistake many families make when it comes to lowering college expenses.

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Each year the Department of Education awards about $120 billion in grants, loans and other funds to help millions of students afford education costs. It is the largest provider of student financial aid in the country.

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But, even though people appear to be familiar with the Free Application for Federal Student Aid (FAFSA), many still fail to apply.

Trey Peterson of Haven Financial Group told FOX Business that the reasons people don’t apply include the fact that they find it difficult to fill out the application, and/or assume that they won’t qualify for aid.

If you apply, “there is a good chance you will qualify,” Peterson said, adding that failure to do so could cause families to miss out on thousands of dollars.

In fact, a 2016 NerdWallet study found that high school graduates forewent $2.7 billion in free federal grant money, including 747,579 people who were likely eligible for a Pell grant. The average amount of money that students who did not apply were found to have missed out on was $1,861.

A 2018 survey found that 65 percent of students or parents said they applied for aid. Of those who didn’t, 33 percent thought they didn’t need it and 32 percent though they would not qualify.

Federal grants do not need to be repaid, which will limit a student’s debt burdens after graduation. And federal loans tend to have low interest rates.

Each college may have its own FAFSA deadline – and each state has its own deadline. But Peterson encourages people to apply as soon as possible, because funds can be available on a first-come, first-served basis.

“Some colleges and states do run out of money,” he noted.

When it comes to other mistakes people make when applying for aid, Peterson said oftentimes applicants fail to read the instructions carefully. If something is incorrect on an application, it will slow down the process – putting you at a greater risk of missing out on funds.

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And finally, one last thing to make sure of when filling out FAFSA forms is that you sign the bottom, something Peterson has seen a number of applicants forget to do.

According to data from FAFSA, for the 2017-2018 application cycle it received nearly 19 million applications, which included 9.1 million from students who were pursuing their first Bachelor’s Degree.

Outstanding student loan debt surpassed $1.5 trillion in 2018 – second only to mortgage debt – doubling over the past decade.